Borrowing 102: Choosing a lender
I keep a list of reliable lenders for my clients’ use. There are lots and lots of good loan originators out there. I know twice as many as I have on my list.
These are the things I expect from my lender-contacts:
1. No over-promising. If you can’t get a conventional loan for these buyers, don’t say you can.
2. Be available. Answer questions.
3. Provide a pre-approval letter that does not disclose more personal information than is necessary.
4. Get the loan commitment in on time. (The loan commitment is the promise that your file is 100 percent approved and the funds are allocated for your mortgage.)
5. Offer a range of loan options, with full explanations.
6. The “Good Faith Estimate” and the actual closing costs should be about the same.
The lender you want is one with a following of satisfied borrowers. They have a long-range perspective on their business. That lender will say, “You should not borrow that much” instead of "Here is a way to do the impossible." When the subprime mortgage crisis was coming to a head in 2007, I made some phone calls to the lenders that were on my list. Not one of them had been writing subprime mortgages. Some had a few subprime mortgages written by another person in their office.
If you work with a true buyer agent, like me, you can share their contacts. Since you are not all going to be my clients, this is what you can do without an agent:
As a rule of thumb, the loan originator/loan officer matters more than the company. There were people writing irresponsible loans sitting two desks away from honest and reliable people. If you find a loan originator who was working in 2003 who is still in business, chances are that they did not fall into the temptation to write irresponsible loans. Call friends or family who bought in Massachusetts before 2003. If they are still happy with their mortgage, find out who they used. If they got painted into a corner, find out who they used and avoid that person.
Does anyone else have tips for the new borrowers?
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Few good sites to search/find local highly educated loan originators who disclose all fees upfront are:
Upfront Mortgage Brokers Association
www.upfront mortgagebrokers.org
Certified Mortgage Planning Specialist Institute (CMPS)
www.cmpsinstitute.org
With all the new education and licensing requirements in place many of the remaining brokers should be upfront and honest. Ask for references.
Eliminate the midde-man and go directly to a bank.
MOST small local community banks pay their LO's on salary. Which has no bearing on the borrower whatsoeva. Eliminate the greedy commissioned based brokers.
Pretty soon mtg. brokers are going away anyway, because they are useless now that we have lending standards again.
Stay away from the middle-man.
I don't agree with the previous comment posted. The rates I've been offered at banks without the middle men have all been much higher than what I was able to find using a broker, even at credit unions which are traditionally lower cost options for borrowing. I do agree with Rona that you should be an informed consumer and ask a lot of questions to make sure you have a broker with whom your comfortable though. There are enough brokers out there that it's not too hard to tell the difference and comparison shopping (both for rates and services levels) is a must.
Doug -- that is exactly the problem, the broker "sells" people like you the lower rate on the phone and perhaps all the way to closing, but they also fail to disclose that their "upfront" fees are astronomically higher. There is no other way a broker a.k.a. -- a middleman, can beat a bank on rate unless they charge a boatload.
Brokers get their money to arrange loans for you from banks, Doug.
Hence the term MIDDLEMAN
Most brokers like to get paid in the back, or from the bank without properly disclosing it to the customer. That's why a lot of people are getting foreclosed on: they listened to a broker tell them what they "could" do instead of staying with their local bank that did it.
Rules are changing and now they must disclose this dirty practice, but almost none of them disclosed it in the past.
That's why most mtg. brokers are selling cell phones in mall kiosk booth right now. Broker's may say on the phone that they can get rate X,Y, or Z, but getting them to do it in person - and provide a Good Faith Estimate of closing cost.... is impossible. Unless you know someone... do you know someone Doug?
There are circumstances that call for mortgage brokers over direct lenders and vice versa. To blanket that one is better than the other does a disservice to consumers. I have found that some loan officers are less willing to "make" it happen because they are getting paid regardless. Financing falling apart is a big problem for buyers and sellers now, so it helps to have someone equally motivated.
There are good lenders and brokers out there just like any other industry. I have had horrendous experience with direct lenders, they were just unmotivated to get it done and put my client at risk of losing the home and possibly their deposit. No one could reach them for days.
With a broker, I have been able to shop around to different lenders, all while dealing with one person that I trust and only pulling one credit report.
On the other hand some local lenders have been key for doing deals in parts of Boston, areas that larger lenders represented by brokers wouldn't touch because of MI assesing the whole zipcode instead of looking at it as a case-by-case basis.
So it really depends on what you are looking for, ask around, get reccomendations.
This blogger might want to review your comment before posting it.
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